Chapter 2. Find Cost Reduction Opportunities in Waste
With Mike Tamilio
Speed is the essence of war.
A consumer goods packaging and container manufacturer was trying to increase the yield of a particular process by 1.5 percent. It focused first on trying to improve the materials forming step, where it's important that the packaging container adheres to strict size tolerances. This company took on several major capital expenses focused on this aspect of the process, only to realize less than a 0.25 percent gain in total product yield.
After the containers were produced, they needed to be packaged. After being packaged, however, often the customer order would change, and the containerswould need to be resorted and repackaged—inevitably damaging some containers in the process and adding enormous complexity to the staging area.
In the language of Lean Six Sigma (LSS), the initial forming step is considered value-add, because it contributes to the final container product in a way that customers value. The packaging, unpacking, sorting, and repacking (and consequent damage) is all non-value-add activity. Or, in a word, waste.
Many companies seek incremental improvements to their value-adding steps, while greater savings can be found by looking first at the waste in their processes. It became clear to this company, for example, that even had it made a 1.5 percent productivity gain in the value-add step, overall productivity would still have been low because of the waste, complexity, ...